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Car insurance premiums soar – and young drivers pay the price

Young drivers are being made scapegoats and priced out of the market by insurance companies desperate to counter the loss of premiums from disloyal customers, according to the findings an Independent on Sunday investigation.

The study found that soaring premiums for young motorists – one company quoted £9,000 for a 17-year-old – are not in line with prices quoted for the rest of the population which have also risen steeply.

The problem is such that the Office of Fair Trading (OFT) has decided to step in, announcing recently that it will launch an inquiry into the escalating price of car insurance.

Average premiums for comprehensive cover rose by over 40 per cent in the 12 months to March, according to the AA. Drivers, aged 17-22, are facing an even tougher time, paying 64 per cent more today – at a typical premium of £2,431. In reality, many young drivers are paying much more than even this.

Recent research from the Institute of Advanced Motorists (IAM), the road-safety charity, found that the cheapest insurance quote for an average 17-year-old driver was a colossal £7,091 a year, while at the top end the highest quote was £9,700.

"You often wonder if they just don't want the business. In the past you attracted young people so that they stayed with you for life, but now people change insurers all the time. It seems to me these companies don't want them," says Neil Greig, IAM's director of policy and research.

We are told repeatedly that younger drivers pay more because they cost more – they have more accidents than other drivers and these accidents are more likely to lead to expensive third-party claims from passengers. Insurers say an increase in fraud and a significant rise in the number of personal injury claims are also to blame for the rises.

Simon Douglas, the director of insurance at the AA, explains that price hikes are inevitable when companies are losing money. "By 2009 insurers were paying out £123 in claims for every £100 taken in premiums. As some insurers began to push up rates in response, people bought instead from those insurers that had not increased prices, causing them to write even higher volumes of loss-making business," he says. "This trend was fuelled by the growth of price-comparison sites, where typically half of customers buy the cheapest product they can get.

Car Insurance Says No To Sharing | Insurance Information

For most, jumping into their friend’s or relative’s car when their own is out of action is the norm; however, this may not be the case for your insurer.

Many people, who drive other’s cars, view this as a real plus of their car insurance. This benefit means that you can borrow a relative’s car when yours is out of action or drive a friend’s when they’ve had too much to drink in order to drive it themselves.

For drivers who’ve searched around for the best car insurance quotes for comprehensive car insurance cover, it has always been the case that they can then drive other cars with the owner’s permission, and therefore have third party cover. However, this is changing as insurers are tightening the rules on borrowing others’ cars.

It is worth consulting the small print on your car insurance policy to see whether or not you are covered to drive others’ cars. This is because you may appear to have third party cover but in some policies, the small print says that you can only drive other people’s cars if it is in an emergency than needs immediate attention. Obviously, it is difficult to determine exactly what would constitute as an emergency that would require such quick action, and this is why many people are finding it more and more difficult to justify borrowing a friend’s car.

The British Insurance Brokers’ Association has said that the third party clause is being looked at, as people have their own interpretations of it. The Association believe that there should be a standard definition so that drivers are able to tell whether they are covered or not.

Some insurers such as; Norwich Union Direct and RAC Direct have removed the Drive Other Cars benefit from their car insurance policies, there are also some insurers who state that the driver needs to be 25 or over in order to receive the benefit. Another restriction that some insurers have included is to exclude certain professions from the Drive Other Cars option, such as those who work in the motor or private car hire trades.

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